<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: SEPTEMBER 30, 1997 Commission File Number: 0-26182
INTERNATIONAL IMAGING, INC.
-----------------------------------
(Exact name of small business issuer
as specified in its charter)
DELAWARE 13-3469649
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1875 CENTURY PARK EAST, SUITE 930, LOS ANGELES, CALIFORNIA 90067
----------------------------------------------------------------
(Address of principal executive office)
ONE ESECO ROAD, CUSHING, OKLAHOMA 74023
----------------------------------------------
(Former address of principal executive office)
(310) 203-4500
-----------------------------------------------
(Issuer's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the close of the period covered by this report. 16,077,092 common
shares par value $0.0012 per share.
Transitional Small Business Disclosure Format: Yes No X
---- ----
<PAGE> 2
INTERNATIONAL IMAGING, INC.
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
PART I. Financial Information
Item 1. Condensed Consolidated Balance Sheets - 3
September 30, 1997 and March 31, 1997
Condensed Consolidated Statements of Operations - 4
Three and Six Months Ended September 30, 1997 and 1996
Condensed Consolidated Statement of Stockholders' Equity - 5
Six Months Ended September 30, 1997
Condensed Consolidated Statements of Cash Flows - 6-7
Six Months Ended September 30, 1997
Notes to Condensed Consolidated Financial Statements - 8-11
Six Months Ended September 30, 1997 and 1996
Item 2. Management's Plan of Operation 12-14
PART II. Other Information 15
</TABLE>
2
<PAGE> 3
INTERNATIONAL IMAGING, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 141,387 $ 30,189
Accounts receivable
684,209 --
Due from officers and employees
55,273 37,500
Inventory
1,969,072 --
Prepaid expenses and other assets
39,482 --
------------ -----------
2,889,423 67,689
Machinery and equipment, net
6,439,066 30,231
Investment in Quantex 2,500,000
2,500,000
Other assets and investments 1,046,011
1,734,166
============ ===========
$ 13,562,655 $ 3,643,931
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
1,622,240 236,724
Accrued expenses
136,583 275,000
Notes and advances payable
894,123 1,107,214
Current installments of capital lease obligations
104,012 --
Purchase obligations due
2,836,000 1,336,000
Loan from shareholder
349,365 176,280
------------ -----------
5,942,323 3,131,218
Non-current capital lease obligations
39,567 --
Deferred income taxes
552,000 --
Subsidiary preferred stock
4,507,165 2,407,820
Minority interest
11,098 --
STOCKHOLDERS' EQUITY
Common stock
19,293 20,000
Additional paid-in capital
5,971,156 5,670
Foreign currency translation adjustment
(50,054) --
Retained earnings (deficit) (3,429,893) (1,920,777)
------------ -----------
2,510,502 (1,895,107)
============ ===========
$ 13,562,655 $ 3,643,931
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
INTERNATIONAL IMAGING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
June 20, 1995
Three Months Ended Six Months Ended (Inception) to
September 30, September 30, September 30,
1997 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 18,333 -- $ 24,855 -- $ 24,855
Operating and administrative expenses 519,084 1,287,840 3,208,618
241,435 349,539
------------ ------------ ------------ ------------ ------------
Net loss from operations before income taxes (500,751) (241,435) (1,262,985) (349,539) (3,183,763)
Income taxes -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss $ (500,751) $ (241,435) $ (1,262,985) $ (349,539) $ (3,183,763)
============ ============ ============ ============ ============
Net loss per share $ (0.03) $ (0.02) $ (0.08) $ (0.02) $ (0.20)
============ ============ ============ ============ ============
Weighted average shares outstanding 16,077,092 16,077,092 16,077,092 16,077,092 16,077,092
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
INTERNATIONAL IMAGING, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Foreign
Additional Currency Retained
Common Stock Paid-In Translation Earnings
Shares Amount Capital Adjustment (Deficit) Total
------ ------ ------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance - March 31, 1997 48,917,500 $ 20,000 $ (580) $(1,920,778) $(1,901,358)
Recapitalization (37,287,092) (6,043) (2,751,795) 2,757,838 --
----------- ----------- ----------- --------- ----------- -----------
11,630,408 13,957 (2,752,375) -- 837,060 (1,901,358)
Acquire Rose Color and SPS Alfachem 3,000,000 3,600 5,991,923 (50,054) 5,945,469
Acquire International Imaging, Inc. 1,446,684 1,736 2,731,608 (2,757,838) (24,494)
Conversion of preferred stock
warrants for less
than the par value of the
preferred stock (246,130) (246,130)
Net loss (1,262,985) (1,262,985)
=========== =========== =========== ========= =========== ===========
Balance - September 30, 1997 16,077,092 $ 19,293 $ 5,971,156 $ (50,054) $(3,429,893) $ 2,510,502
=========== =========== =========== ========= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
INTERNATIONAL IMAGING, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1997
----
<S> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net earnings (loss) (1,262,985)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 33,100
Changes in assets and liabilities:
Inventory (3,066)
Accounts payable and accrued expenses 39,897
Preferred stock issued for consulting services 729,310
-----------
Cash flows used in operating activities (463,744)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures (2,930)
Cash acquired in acquisitions 141,387
-----------
Cash flows used in investing activities 138,457
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Increase in amount due shareholder 173,085
Proceeds from sale of preferred stock 263,400
-----------
Cash flows provided by financing activities 436,485
-----------
Net increase (decrease) in cash and cash equivalents 111,198
Cash and cash equivalents, beginning of period 30,189
-----------
Cash and cash equivalents, end of period $ 141,387
===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
INTERNATIONAL IMAGING, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1997
----
<S> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes are as follows:
Interest $ --
Income taxes --
Noncash investing and financing activities are as follows:
Office fixtures acquired for preferred stock $276,165
Real estate acquired for preferred stock 165,000
Note receivable received from sale of real estate 165,000
Preferred stock issued as partial consideration in the
acquisition of Hetero-Mins 200,000
Preferred stock issued for consulting services 729,310
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE> 8
INTERNATIONAL IMAGING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated financial statements of
International Imaging, Inc. include the accounts of International
Imaging, Inc. ("Imaging"), and its wholly owned subsidiaries, Chiralt
Corporation ("Chiralt"), Rose Color, Inc. ("Rose Color") and SPS
Alfachem, Inc. ("SPS") and the 80% owned subsidiary of Rose Color, JBW
International, Inc. ("JBW"). (Imaging and its subsidiaries are
collectively referred to as the "Company").
On April 8, 1997, Imaging filed a prenegotiated Joint Plan of
Reorganization (the "Reorganization Plan") under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for
the Western District of Oklahoma, which plan was confirmed on August
19, 1997.
The Reorganization Plan called for a one for five reverse stock split
and the issuance of common stock and warrants to the creditors in
exchange for outstanding debt and accrued interest. Specifically,
short-term advances to related parties in the amount of $206,512 and
accrued interest in the amount of $7,249 were exchanged for 500,000
shares of common stock and warrants to purchase 2,000,000 and 1,000,000
shares of common stock (post split) at $3.50 and $4.50 per share,
respectively.
Subsequent to confirmation of the Reorganization Plan, Imaging entered
into an agreement to sell its wholly owned subsidiary, Electronic
Systems Engineering Co. and to acquire through issuance of 14,630,408
shares of its common stock the common stock of Chiralt, Rose Color and
SPS in a transaction accounted for as a purchase. After the
transaction, the former owners of Chiralt owned approximately 72% of
the combined entities, accordingly, Chiralt is accounted for as the
surviving entity.
The financial statements included in this report have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission for interim reporting and include all adjustments
(consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation. These
financial statements have not been audited.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations for interim reporting. The Company believes that
the disclosures contained herein are adequate to make the information
presented not misleading. However, these financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report for the year ended March 31,
1997, which is included in the Company's Form 10-KSB which was filed in
July 1997. The financial data for the interim periods presented may not
necessarily reflect the results to be anticipated for the complete
year. Certain reclassifications of the amounts presented for the
comparative period have been made to conform to the current
presentation.
a. NATURE OF BUSINESS
IMAGING - Imaging is a public company with no direct operations.
CHIRALT - Chiralt is primarily a marketer of proprietary
healthcare products. Chiralt has developed or obtained protected
nutraceuticals (nutritional supplements), a mineral-status test
and over-the-counter (OTC) drugs.
8
<PAGE> 9
ROSE COLOR - Rose Color is engaged in the manufacture and
marketing of specialty organic dyes for the petroleum and plastics
industries. Rose Color owns 80% of JBW, which serves primarily as
a consultant to companies involved with specialty organic dyes. In
addition, Rose Color has a 49% interest in Mafatlal Rose Color
Industries Ltd. (MRCI) an Indian company which manufactures dyes
for foreign sales.
SPS - SPS has international alliances that will allow importation
of difficult-to-obtain nutritional herbs and other botanicals, as
well as fine chemicals for nutritional supplements and OTC drugs.
b. REVENUE AND COST RECOGNITION - Revenues from sales are recognized
when the product is shipped. Cost of sales consists of direct
material costs and those indirect costs related to the
manufacturing process, such as indirect labor, supplies,
utilities, repairs and depreciation.
c. INVENTORIES - Raw materials, work in process and finished goods
inventories are stated at the lower of weighted average cost or
market.
d. PROPERTY, PLANT AND EQUIPMENT - Owned property, plant and
equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the
respective assets. Equipment under capital leases is stated at the
lower of the present value of minimum lease payments at the
beginning of the lease term or fair value at the inception of the
lease and is amortized over the estimated useful life of the
related asset.
e. INCOME TAXES - Deferred income taxes are recognized for income and
expense items that are reported for financial reporting purposes
in different years than for income tax purposes.
f. NET EARNINGS PER SHARE - Net earnings per share amounts are
computed using the weighted average number of shares outstanding
during the period. Fully diluted earnings per share is presented
if the assumed conversion of common stock equivalents results in
material dilution. For purposes of the calculation presented
herein, it is assumed that all shares have been outstanding for
the full periods presented.
9
<PAGE> 10
B. ACQUISITION
The acquisition by Imaging of Chiralt, Rose Color and SPS was completed
effective September 30, 1997. As a result of the size of Imaging in
comparison to the other companies, Chiralt is considered the acquiring
company for financial reporting purposes. The assets acquired and
liabilities assumed are summarized as follows:
<TABLE>
<CAPTION>
Rose Color
and SPS Imaging Total
----------- ----------- -----------
<S> <C> <C> <C>
Current assets, excluding cash $ 2,707,470 $ $ 2,707,470
Machinery and equipment, net 6,162,741 6,162,741
Other assets and investments 283,255 40,000 323,255
----------- ----------- -----------
Notes payable and long-term debt 9,153,466 40,000 9,193,466
Accounts payable (143,579) (143,579)
Accrued expenses (1,006,109) (64,509) (1,070,618)
Deferred income taxes (136,583) (136,583)
Purchase obligations (552,000) (552,000)
Minority interest (1,500,000) (1,500,000)
Foreign currency translation adjustment (11,098) (11,098)
Common stock issued 50,054 50,054
(5,995,523) 24,494 (5,971,029)
=========== =========== ===========
Cash acquired $ (141,372) $ (15) $ (141,387)
=========== =========== ===========
</TABLE>
If the acquisitions were consummated as of April 1, 1996, revenues for
the six months ended September 30, 1997 and 1996 would have been higher
by $2,827,000 and $2,861,000, respectively. Net loss for the six months
ended September 30, 1997 and 1996 would have been $452,000 higher
($.03/share) and $46,000 lower ($.00/share), respectively.
C. INVENTORIES
Inventories consist of the following at September 30, 1997:
<TABLE>
<S> <C>
Raw materials $ 476,253
Work in process
83,991
Finished goods 1,408,828
=============
$ 1,969,072
=============
</TABLE>
10
<PAGE> 11
D. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30, 1997:
<TABLE>
<S> <C>
Land $ 500,000
Buildings and improvements 1,425,726
Machinery and equipment 5,062,692
Office furniture and equipment 403,428
-----------
7,391,846
Accumulated depreciation (952,780)
-----------
$ 6,439,066
===========
</TABLE>
E. LEASES
The Company leases equipment under capital leases that expire over the
next three years. The present value of future minimum capital lease
payments as of September 30, 1997 is $143,579, of which $104,012 is due
within twelve months.
F. PURCHASE OBLIGATIONS
As a part of the acquisition of Rose Color and SPS, the Company agreed
to pay $1,500,000 to a former parent of Rose Color and SPS.
As a part of the acquisition of approximately 62% of the common stock
of Quantex Corporation, Chiralt agreed to issue their preferred stock
with a face value of $1,000,000 and to pay $1,500,000 in cash. To date
Chiralt has paid a total of $164,000 of this obligation. As a result of
the uncertainty of the Company being able to complete the acquisition,
the Company's ownership interest has not been consolidated.
G. NOTES AND ADVANCES PAYABLE
As of September 30, 1997, the Company had a remaining balance of
$894,123 in loans and advances. The Company expects that a significant
portion of these amounts will ultimately be converted to equity in the
Company.
H. COMMON STOCK AND COMMON STOCK WARRANTS
During the six months ended September 30, 1997 warrants to purchase
2,000,000 shares and 1,000,000 shares of the Company's common stock at
an exercise price of $3.50 and $4.50, respectively, were granted. No
warrants or options were exercised during the period.
I. DEFERRED INCOME TAXES
The acquisition of Rose Color and SPS by the Company have included the
acquisition of a deferred income tax liability in the amount of
$552,000. This amount includes a liability in the amount of $905,000 as
a result of the financial basis of assets exceeding the income tax
basis. The gross liability is offset by the tax effects of other
temporary differences, which include net operating loss carryforwards
in the amount of $214,000 and foreign operations in the amount of
$139,000.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
From time to time, the Company may publish forward-looking statements
relating to certain matters, including anticipated financial
performance, business prospects, product development, and other similar
matters. All statements other than statements of historical fact
contained in this Form 10-QSB or in any other report of the Company are
forward-looking statements. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of that safe harbor, the Company notes
that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. In
addition, the Company disclaims any intent or obligation to update
those forward-looking statements.
As was discussed in the notes to the consolidated financial statements,
the completion of the merger has amalgamated the nucleus of a science
and technology-based company. The Chiralt Corporation is primarily a
marketer of proprietary healthcare products. It has already developed
or obtained protected nutraceuticals (nutritional supplements), a
mineral-status test and, over-the-counter (OTC) drugs.
Chiralt already has a broad licensing agreement with the company which
owns the patent rights to the unique non-invasive intracellular mineral
EXATM Test, and is negotiating to acquire controlling interest in the
company. Hetero-Mins, which the Company has under contract to purchase,
has developed a unique liquid mineral product that can be co-marketed
with the EXA Test, and should provide substantial marketing synergy in
both the human and animal market segments. Additionally, the minerals
have commercial importance in certain segments of the agribusiness
industry. A clinical laboratory (Chiralt Clinical Labs) operates as a
division of Chiralt and provides the analytical support required by the
EXA Test procedure.
Rose Color produces and supplies dyes, pigments and other specialty
colors, as well as related chemicals and intermediary products to a
wide variety of industrial uses, but with current emphasis on petroleum
products, plastics, coatings, including paints and inks, with
developing positions in textiles, paper, leather, wood, hair and
others. Rose Color has been in operation since 1987.
Through SPS, the Company offers nutritional supplements, natural
products and extracts, fine chemicals, pharmaceutical, flavor and
fragrance and agrochemical products and intermediates in addition to
providing custom/toll product development and manufacturing
capabilities. SPS provides a complementary supply of products to the
marketing strengths of Chiralt.
In addition, Chiralt has an agreement to acquire controlling interest
in Quantex Corporation ("Quantex"). Quantex is presently employing its
proprietary phosphor/electron trapping technology to produce products
for use in non-destructive testing, electroluminescence, and infrared
detection.. It plans on rapidly expanding the technology to create
chemical-free, reusable, "filmless" digital radiography systems.
The Company's ultimate profitability projections are based upon a
number of assumptions, including the acquisition of a number of
companies and the acquisition or license of a number of technologies.
If the Company is unable to raise sufficient capital to complete its
targeted acquisition program, it cannot be guaranteed that the choice
of alternatives would provide the same synergy and ultimate revenue or
profitability believed to be possible with the currently identified
acquisitions.
12
<PAGE> 13
HEALTHCARE PRODUCTS AND SERVICES
The Company, through Chiralt, has developed or acquired the rights to
market several leading edge medical and nutritional products and
technologies. The Company has integrated these products and
technologies into a unique marketing strategy that allows penetration
into multiple healthcare markets, thus maximizing the financial
contribution that each product or service brings to the Company.
In 1996, the American public spent billions of dollars on nutritional
supplements. The nutritional supplement market and the homeopathic drug
market are growing rapidly. The Company plans to participate in this
market by marketing its animal and human healthcare products to both
the professional and retail sectors. The complementary nature of the
different lines, which include laboratory tests and services,
nutritional supplements (nutraceuticals), OTC drugs, and medical
devices, provide for unique opportunities to penetrate multiple
markets. These markets have been identified as the "Professional
Sector," which includes physicians, chiropractors, other traditional
and alternative medicine healthcare professionals and veterinarians;
and the "Retail Sector," which includes nutritional outlets,
pharmacies, mass merchandisers, and health and sports clubs.
The diversity of the target markets presents unique opportunities and
marketing challenges for the Company, which is in the early stage of
its development. To capitalize on the opportunities and meet the
distribution, sales, and advertising challenges necessary to
successfully execute the marketing plan and meet financial projections,
the Company is in the process of establishing a series of distribution
networks designed to penetrate the different markets.
To date, the Company has established, or is establishing, several
distribution networks throughout the United States and Canada. These
distribution networks consist of independent manufacturers'
representatives, brokers, and distributors that have established a
clientele base in one of the Company's target market segments.
Distribution networks are being established for the direct marketing to
chiropractors, acupuncturists, and other alternative medicine
practitioners; for the direct marketing to veterinarians and other
animal health professionals; for nutrition centers, health and sports
clubs, and other non-traditional retail outlets; and to pharmacies,
supermarkets, mass merchandisers and other retail outlets. The use of
an out-sourced sales force allows marketing penetration of many markets
without the need for hiring a large sales force.
The products to be offered by the Company are introduced to the
professional or retail sector by a salesperson of the distribution
network. The salesperson is responsible for all sales activities,
including education and account service, and receives a commission
(typically 15% of net sales) on each completed sale. The salesperson is
typically responsible to a Regional Distributor, who is in turn
responsible to Chiralt's Marketing Management team. The Regional
Distributor is responsible for all sales and sales management in the
region, and will operate against mutually agreed upon sales performance
criteria. By establishing these criteria, the Company believes that it
can forecast sales with the level of accuracy necessary for efficient
manufacturing and inventory control.
Chiralt has developed an advertising strategy that includes targeting
both the lay-person and the healthcare professional. A lay-person
oriented program, consisting of television and print ads and articles,
is being developed. This program will serve to educate the public with
regards to the benefits of the products and create an awareness that
will either result in a direct sale or in an inquiry to their
healthcare professional. A complementary print program, use of the
Internet, and video-based professional education and communications
program are also being developed.
A major portion of the business of the Company will be to develop,
finance, produce, distribute and otherwise exploit alternative
healthcare products. The alternative healthcare industry is a highly
competitive industry and the market appeal and profitability of any
particular product or
13
<PAGE> 14
service cannot by predicted with any degree of certainty. The market
appeal and success of a product depends on a number of factors,
including the popularity of other products then being distributed,
competition for advertising, practitioner sponsorship, major authority
sponsorship, the availability of alternative forms of treatment,
critical reviews of practices and, to a very large degree, public
perception generally, all of which will change and cannot be predicted.
Although the Company has and will continue to utilize the judgment of
informed alternative medical practitioners to evaluate the commercial
and medical elements involved in its products and services and although
the Company intends to consult with additional distributors regarding
the exploitation of the products and services, there can be no
assurance of the ultimate success of the products and services. A
number of factors cannot be predicted, such as new Food and Drug
Administration ("FDA") and state regulations, new limitations on the
willingness of insurance companies to cover testing services, or to pay
prices for the testing services which remain profitable for the
Company, or the emergence of competing technologies and medical
methodologies. Even if critically acclaimed and properly distributed,
the financial success of the alternative healthcare products and
services cannot be predicted and there can be no assurances that
revenue received by the Company will be sufficient for it to remain
viable.
DYES, PIGMENTS AND SPECIALTY CHEMICALS
Rose Color's original product line was in solvent dyes, with its
Rosanol dyes utilized in the coloration of petroleum products and its
Rosaplast dyes utilized primarily for the coloration of plastics. Rose
Color currently represents approximately 7% of the domestic solvent dye
market and approximately 3% of the worldwide market which is
approximately $200-$250 million annually. As a consequence of the
considerable diversity of substrates to be colored, colors required and
their application properties, as well as cost, it is essential to
expand the range of products offered in order to increase sales.
Rose Color has elected to concentrate its initial expansion into the
pigment dye market. Current estimates are a worldwide market of
approximately $2.5 billion. Aside from the much large market, the same
customers base also utilizes pigment dyes, thus allowing for a lower
initial cost of marketing.
FINANCE
The Company has significant expansion plans and will require capital to
implement their business plan. The Company expects to utilize both debt
and equity to fund their expansion, with the asset base of Rose Color
expected to provide the assets necessary to fund initial working
capital requirements.
14
<PAGE> 15
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Passaic Valley Sewerage Commission ("PVSC") on June 9, 1997
obtained a Temporary Restraining Order on Rose Color, for alleged
transgressions of the sewer permit. Rose Color has fully cooperated
with PVSC in investigating the complaints and taking agreed remedial
actions. A draft consent order has been forwarded to PVSC for their
approval.
Item 2 through 5 of Part II have been omitted as not required, not
significant, or because the information has been previously reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Not applicable
(b) Reports on Form 8-K - The Company filed Form 8-K on September
17, 1997 to report the acquisition of Chiralt Corporation,
Rose Color, Inc. and SPS Alfachem, Inc. Pro forma financial
schedules were filed on November 17, 1997 which gave effect to
the acquisition.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
INTERNATIONAL IMAGING, INC.
Date: November 20, 1997 By: /s/ Ronald J. Amen
----------------------------------
Ronald J. Amen, President
and Principal Accounting Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from (a)
Financial Statements as of September 30, 1997 and for the six month period then
ended and is qualified in its entirety by reference to such (b) Form 10-QSB for
the quarter ended September 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 141,387
<SECURITIES> 0
<RECEIVABLES> 775,209
<ALLOWANCES> 91,000
<INVENTORY> 1,969,072
<CURRENT-ASSETS> 39,482
<PP&E> 7,391,846
<DEPRECIATION> 952,780
<TOTAL-ASSETS> 13,562,655
<CURRENT-LIABILITIES> 5,942,323
<BONDS> 0
0
0
<COMMON> 19,293
<OTHER-SE> 2,491,209
<TOTAL-LIABILITY-AND-EQUITY> 13,562,655
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<INCOME-CONTINUING> (1,262,985)
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<NET-INCOME> (1,262,985)
<EPS-PRIMARY> (0.08)
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</TABLE>
